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Immigration reform is taking its time in Congress but the executive branch agencies charged with enforcing immigration laws have not been idle. Rather, they’ve been implementing bits and pieces of the reform package on their own – but not any of the good ones.

Last month, the U.S. Citizenship and Immigration Services (USCIS) announced that it will “lock” a Social Security number when E-Verify or USCIS employees, based on new algorithms, believe the number is fraudulent or used fraudulently. The number is locked and a tentative non-confirmation (TNC) is issued to the applicant or applicants using the contested number – preventing any further E-Verify confirmations until the fraudulent user proves he or she is the lawful holder.

AlthoughmycolleaguesandI have written extensively about the E-Verify system and its threat to liberties and economic growth, locking adds a newer negative dimension.

“Locking” was proposed as part of the summer’s comprehensive immigration reform bill that was passed by the Senate and in the House’s Legal Workforce Act. Locking was a bad idea in those bills and remains a bad idea today when implemented by regulatory fiat.

On Sunday, CBS’s 60 Minutes profiled Sen. Tom Coburn’s (R-OK) on-going investigation of fraud and abuse in the federal government’s two main disability programs: Social Security Disability Insurance and Supplemental Security Income (see Chris Edwards’ discussion here). Yesterday, the Senate Committee on Homeland Security & Governmental Affairs (Coburn is the ranking member) held a hearing on a particularly egregious example centered on the Social Security Administration’s Huntington, WV office.

The case is a perfect example of what is quickly becoming known as the “disability-industrial complex”: specialty law firms overwhelming the system with dubious disability claims, doctors vouching for applicants with dubious claims, and federal administrative law judges awarding disability benefits to individuals with dubious claims.

The committee produced a 160+ page report that is jaw-dropping from beginning to end. If you’re pressed for time, at least check out the “findings” on pages 4-7. In the Huntington case, it’s pretty clear that the three points of the triangle were all in cahoots. It’s also quite similar to a still unfolding disability scandal in Puerto Rico that I discussed in August. In both cases, the public is now aware of the scandals thanks to the Wall Street Journal’s Daniel Paletta’s excellent investigative reporting. That begs two questions, however: what other major disability scandals are sitting out there waiting for a curious reporter discover? And what other ticking time-bombs are Social Security Administration bureaucrats aware of but doing little to defuse?

In 2011, the Wall Street Journal’s Daniel Paletta reported on the rapid growth in individuals applying for and receiving Social Security disability benefits. Paletta found that Puerto Rico had become a particularly easy place to obtain benefits. Officials with the Social Security Administration (SSA) absurdly claimed that nothing was amiss.

It looks like the SSA is about to get some egg on its face.

Yesterday, Paletta reported that federal investigators, including the FBI, raided doctors’ offices in Puerto Rico as part of a widening probe into disability fraud on the island. A doctor’s opinion that an individual is suffering from a disability is naturally quite helpful in convincing examiners and judges that benefits are warranted. Investigators are apparently looking into whether Puerto Rican doctors are being paid to document that applicants are disabled. From the article:

In 2006, just 36% of initial applicants in Puerto Rico were awarded benefits. In December 2010, the award rate had jumped to 69%. By 2010, nine of the top 10 U.S. ZIP Codes for workers receiving disability benefits were on the island.

At the time, SSA officials said the high number of recipients and the high award rate was due to the island’s weak economy and a lack of adequate health care for workers.

The program is overseen by the Social Security Administration in Baltimore, but each state and territory is responsible for performing an initial screening to determine eligibility. Social Security officials said in 2011 that Puerto Rico had rigorous standards and a virtually nonexistent error rate.

The characteristics of Puerto Rico’s beneficiaries differed from other areas. In addition to the large clusters in certain zip codes, federal data showed that 33.3% of Puerto Rican beneficiaries qualified because of “mood disorders,” a rate that is at least 10 percentage points higher than any U.S. state.

Disability examiners and federal judges say mental disorders are harder to measure and often rely on medical opinions issued by doctors to make a determination.

SSDI was designed as a way to provide benefits for people who can’t work because of mental or physical health problems, and Americans can qualify for benefits because of ailments ranging from severe back pain to terminal cancer.

A lifetime of benefits, including access to Medicare, can cost the government about $300,000 a person.

As I noted in my recent paper on the growing cost of Social Security Disability Insurance, the SSA’s inspector general says that “fraud is an inherent risk in SSA’s disability programs.” But as my paper explains, the problems with the program go way beyond outright fraud:

Given the subjective and convoluted nature of determining SSDI eligibility, it’s likely that erroneous and unjustified payments are far larger in volume than just outright fraud. The huge, complex, and difficult-to-audit system is a perfect breeding ground for awarding and continuing benefits to people who shouldn’t be on the disability rolls.

The Washington Timesnoted this week that the 2012 improper payment rate for unemployment insurance benefits was 11.4 percent ($10.3 billion out of $90.2 billion), according to U.S. Department of Labor data. The good news is that the figure is down from 12 percent in 2011. The bad news is that it’s still a pathetic waste of money.

When policymakers dream of ways to provide subsidies and safety nets to groups in society, they rarely take into account the large bureaucratic costs that are inevitably involved. The UI system is a complex and costly system for governments and businesses to administer.

State governments must raise taxes from almost 8 million businesses, with tax bills specifically calculated for each firm’s experience rating. At the same time, the states dole out individually calculated benefits to millions of workers and monitor whether each person making a claim is currently eligible. Businesses and states need to adjudicate the many disputed claims for benefits, and states need to police UI tax evasion as businesses try to manipulate the system to get a lower tax rate.

Federal and state UI administration cost taxpayers $5.9 billion in 2010. Despite this large cost, there is widespread concern among experts that the UI system is “in long-term decline” from an administrative perspective. UI computer systems are apparently far outdated in many states, and administrators say that they need more money to do their jobs competently.

Government subsidies often produce unintended consequences. The latest example comes from the New York Times, which reports that federal subsidizes to encourage doctors and hospitals to use electronic billing and recording records are leading to larger Medicare bills. That means that taxpayers are taking a double hit even though policymakers claimed that electronic record-keeping would make health care delivery more efficient, and thus less costly.

Over all, hospitals that received government incentives to adopt electronic records showed a 47 percent rise in Medicare payments at higher levels from 2006 to 2010, the latest year for which data are available, compared with a 32 percent rise in hospitals that have not received any government incentives, according to the analysis by The Times…

Some experts blame a substantial share of the higher payments on the increasingly widespread use of electronic health record systems. Some of these programs can automatically generate detailed patient histories, or allow doctors to cut and paste the same examination findings for multiple patients — a practice called cloning — with the click of a button or the swipe of a finger on an iPad, making it appear that the physicians conducted more thorough exams than, perhaps, they did.

Critics say the abuses are widespread. “It’s like doping and bicycling,” said Dr. Donald W. Simborg, who was the chairman of federal panels examining the potential for fraud with electronic systems. “Everybody knows it’s going on.”

The Times also notes that the subsidies are a bipartisan creation:

Both the Bush and Obama administrations have encouraged electronic records, arguing that they help doctors track patient care. When used properly, the records can help avoid duplicate tests and remind doctors about a possible diagnosis or treatment they had not considered. As part of the economic stimulus program in 2009, the Obama administration put into effect a Bush-era incentive program that provides tens of billions of dollars for physicians and hospitals that make the switch.

But some critics say an unintended consequence is the ease with which doctors and hospitals can upcode — industry parlance for seeking a higher rate of reimbursement than is justified. They say there is too little federal oversight of electronic records.

Of course, now that government has treated a problem by creating a new one, policymakers will argue for more spending on “oversight.” Money for that will come from taxpayers, which means yet another hit for the poor rubes who always get stuck paying for the politicians’ schemes.

See this Cato essay for more on fraud and abuse in Medicare and other government programs.

The following are excerpts from an article in today’s Wall Street Journal. See if you can spot the fraud lobby:

In 2011, New York charged [Medicaid] a per-diem rate of $5,118 for residents of the [state-run] institutions, a network of 11 centers that now house about 1,300 people with severe developmental disabilities. Over the course of a year, Medicaid spends $1.9 million for every resident, or $2.5 billion in total—with half coming from the federal government. But the cost of running the institutions is only a quarter of that amount.

[A congressional] report said New York took advantage of a complex formula and kept federal officials in the dark for years…

The committee’s report said Gov. Andrew Cuomo’s administration refused to cooperate with the investigation. Joshua Vlasto, a spokesman for Mr. Cuomo, said the report’s conclusions were “wrong and totally misleading” and that a threatened “precipitous reduction” in funding would jeopardize administration efforts to modernize and restructure its Medicaid program…

But at a Thursday hearing, Penny Thompson, a CMS deputy director, suggested…, “You can expect to see a rate that’s about one-fifth of its current level” … without specifying a time frame. Such a reduction would reduce the annual federal reimbursement by about $1 billion, punching a hole in New York’s $54 billion Medicaid program…

The skewed methodology traces back more than 20 years, when New York got permission from the federal government to use a different formula for state-run developmental centers, assuring officials that the rates would hew close to costs.

But almost immediately, reimbursements began to skyrocket. The new methodology allowed New York to bill Medicaid for ghost patients: When a patient was discharged from a state-run facility, New York retained nearly two-thirds of the reimbursement amount. The formula also double-billed taxpayers: Many of those patients who left the centers moved into Medicaid-financed group homes.

Between 1990 and 2011, the daily reimbursement rate grew to $5,118 from $348. Ms. Thompson said it wasn’t clear if CMS “completely understood” the cost projections when it approved the rates. CMS officials acknowledge they first became aware of the problem in 2007 but waited three years before launching a probe.

In June 2010, the Poughkeepsie Journal ran a lengthy investigative piece about the rates. CMS started its investigation in response to the newspaper’s report, the committee said.

Lest you think I’m blaming Medicaid fraud on one political party, have a gander at my recent article, “Entitlement Bandits”:

Even conservatives fight anti-fraud measures, albeit in the name of preventing frivolous litigation, when they oppose expanding whistle-blower lawsuits, where private citizens who help the government win a case get to keep some of the penalty.